Rajasthan High Court - Jaipur
Maharana Shri Bhagwat Singhji Of Mewar ... vs Income-Tax Appellate Tribunal, Jaipur ... on 26 April, 1996
Equivalent citations: [1997]223ITR192(RAJ), 1996(1)WLN695
JUDGMENT Anshuman Singh, J.
1. This petition under Article 226 of the Constitution of India is directed against the order dated March 18, 1996, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, on stay Applications Nos. 18 and 19/(JP) of 1996 arising out of Estate Duty Appeal No. 1/(JP) of 1996 and Wealth-tax Appeals Nos. 6 to 12/(JP) of 1996 for the assessment years 1985-86 to 1990-91 and 1992-93 directing the petitioner to deposit 25 per cent. of the outstanding demand payable under the Estate Duty Act and the Wealth-tax Act for the years under appeal on or before April 30, 1996. The recovery of the balance outstanding demand under both the Acts for the years under appeal has been stayed till the disposal of appeals by the impugned order. The present petition came up for admission on April 18, 1996, however, on the request of learned counsel for the petitioner it was ordered to be listed on April 19, 1996. In view of the fact that the Tribunal itself directed the appeals to be fixed for hearing in the second week of May, 1996, it was thought proper to dispose of the petition finally at the admission stage itself. Since the matter was proposed to be finally disposed of, learned counsel for the petitioner was directed to supply a copy of the petition to Mr. G.S. Bapna, standing counsel for the Revenue, in order to give opportunity to the Revenue to oppose the writ petition. Mr. N.M. Ranka, learned counsel for the petitioner, made a statement in court that Mr. G.S. Bapna who was earlier counsel for the Revenue has resigned. It was stated that in his place, Mr. Virendra Dangi has been appointed and as such, learned counsel for the petitioner was directed to approach Mr. Virendra Dangi who too informed learned counsel for the petitioner that he had also resigned. It is unfortunate that there is no standing counsel to represent the Revenue at Jaipur Bench in cases filed against the Revenue. In view of the said fact, the court is left with no option but to proceed to decide the case on the basis of the submissions made on behalf of the petitioner. After hearing the argument of learned counsel for the petitioner, orders were reserved and in the meantime an additional affidavit has been filed on April 24, 1996, by the petitioner by means of which, he wanted the papers annexed to the aforesaid additional affidavit to be brought on record and also the facts to be considered stated in the additional affidavit. It has been averred that after the hearing of the petition was over the petitioner received a rectification order and two letters which he has filed along with the additional affidavit. I have perused the contents of the additional affidavit and I am of the opinion that the facts contained in the affidavit and the documents annexed thereto are relevant for the decision of the case and as such, the additional affidavit is ordered to be placed on record. Before dealing with the submission raised on behalf of the petitioner, it is necessary to narrate the relevant facts of the case, which run as under :
2. Maharana Shri Bhagwat Singhji of Mewar, the former Ruler of the State of Mewar, died on November 3, 1984. His late Highness Maharana Bhagwat Singh, son of His late Highness Maharana Bhupal Singh, Udaipur, left the last will dated May 15, 1984, and appointed (i) Shri Arvind Singh of Mewar, son of His late Highness ; and (ii) Shri A. Subramaniam, son of Shri T.S. Appu Aiyer, as executors of the said will. The executors made a petition for probate in the Rajasthan High Court at Jodhpur which was registered as S.B. Testamentary Case No. 1 of 1985. The probate of the will was granted by this court on November 13, 1987, and the certificate dated February 15, 1992, was issued in favour of the executors by the Registrar of this court. The executors have undertaken to administer the same and make full and true inventory of the said property and credits and exhibit the same in the court within six months from the date of grant as also to render to the court a true account of the said property and credits. Thereafter, Rajmata Sushila Kumari and others filed appeal before the Division Bench of this court against the order of the learned single judge dated November 13, 1987, granting probate in respect of the will dated May 15, 1984, which was registered as D.B. Civil Special Appeal No. 24 of 1988 and the Division Bench of this court vide its judgment dated May 12, 1993, dismissed the aforesaid appeal with costs. The executor, Shri Mahendra Singh, son of His late Highness Maharana Shri Bhagwat Singhji, preferred a special leave petition being S. L. P. (Civil) No. 10313 of 1993 before the apex court against the order dated May 12, 1993, passed by the Division Bench of this court rejecting the appeal filed by Rajmata Sushila Kumari and others. Consequently, the said special leave petition was also dismissed by the apex court on May 9, 1994. It appears that the District Judge, Udaipur, passed an order dated December 2, 1995, [?], on the civil suits filed by Shri Mahendra Singh and others against which miscellaneous appeals were filed by Shri Mahendra Singh and others in this court. The said appeals were disposed of by this court on June 11, 1993, and directions issued by this court in the aforesaid appeals were as under :
" It is directed that Shri Arvind Singh shall render true and correct account of the suit properties, i.e., immovable and movable properties, which are in his possession, management and control. He should also render the true and correct account of the income arising out of these properties since 1983 and onwards. It is further directed that Shri Arvind Singh will allow the access of Shri Mahendra Singh to the account maintained in respect of income arising out of immovable and movable properties, which are in the possession and control of Shri Arvind Singh, as and when Shri Mahendra Singh wants to see the accounts of income of these properties, maintained by the executors. He should file the true and correct account of income arising out of these properties duly audited by the chartered accountant in the trial court within two months from the date of this order. Thereafter he will continue to submit the above account every year by end of May. It is further ordered that Shri Arvind Singh, an executor of the will of Maharana Bhagwat Singh (defendant No. 1), his agents servants or officers are further restrained from disposing and/or alienating or otherwise dealing with the suit properties till decision of the suit."
3. It has been averred that in pursuance of the aforesaid order of this court the petitioner is maintaining regular and proper books of account as well as the details of movable and immovable properties of the late Highness Maharana Shri Bhagwat Singhji and the same are being audited by a chartered accountant. From the perusal of the directions issued by this court on June 11, 1993, there is no room for doubt that the petitioner has been restrained from disposing, alienating or otherwise dealing with the suit properties during the pendency of the civil suits. It appears that the assessment proceedings for the assessment years 1985-86 to 1990-91 and 1992-93 under the Estate Duty Act as well as under the Wealth-tax Act were initiated against the petitioner. The Assistant Controller of Estate Duty made assessment under the Estate Duty Act on January 20, 1989, computing the taxable estate at Rs. 44,01,892. The appeal was partly allowed by the appellate authority on December 12, 1990. Thereafter, the respondents issued a notice under Section 59 of the Estate Duty Act on September 23, 1991. The younger son of the late Maharana, Shri Arvind Singhji, who was also one of the executors of the will, declared the value of the estate at Rs. 25,12,762. The value of the estate was, however, declared at a very high figure by the elder son of the late Maharana Shri Mahendra Singhji at Rs. 5,47,29,091. Assessment under the Estate Duty Act was thereafter completed on May 31, 1993, computing the taxable estate at Rs. 7,50,24,227. An appeal was again filed and the appellate authority allowed the appeal in part vide order dated December 6, 1993. The taxable estate was recomputed at Rs. 1,16,78,140 and the estate duty was determined at Rs. 88,91,419. Three appeals were filed before the Tribunal, one by the elder son of the late Maharana, Shri Mahendra Singhji, the second by the younger son, Shri Arvind Singhji, and the third by the Revenue. The Tribunal consolidated all the appeals of all the accountable persons. The matter was, therefore, again heard by the appellate authority under the Estate Duty Act and as per the appellate order dated November 22, 1995, the taxable estate of the late Maharana has been valued at Rs. 1,42,55,498. An amount of Rs. 1,17,72,287 has been determined as the estate duty payable under the Estate Duty Act. A sum of Rs. 23,13,249 is said to have been paid so far. Similarly, the assessment proceedings under the Wealth-tax Act were also initiated against the petitioner for the assessment years 1985-86 to 1990-91 and 1992-93 which culminated in filing seven appeals before the Income-tax Tribunal which are pending. Two stay applications were filed before the Income-tax Tribunal, Jaipur Bench, Jaipur, on behalf of the petitioners for staying the recovery of the impugned tax. The additional affidavit which has been filed by learned counsel for the petitioner reveals that the Additional Controller of Estate Duty, Udaipur Range, Udaipur, vide his order dated April 18, 1996, has rectified the liability of the petitioner under the estate duty which has been reduced to Rs. 90,89,740 out of which, the petitioner has already paid Rs. 22,13,249 and the balance payable by the petitioner remains only Rs. 68,76,491. Since the facts were identical in both the stay applications, they have been disposed of by a common order by the Tribunal on March 18, 1996. The first submission made by learned counsel for the petitioner is that the Tribunal has not applied its mind judiciously to the facts and the relevant laws governing the grant of stay and the directions for deposit 25 per cent. of the impugned tax by the Tribunal is wholly erroneous and arbitrary in view of the fact that the Tribunal itself has stayed the rest of the impugned tax till the disposal of appeals. I have carefully perused the impugned order passed by the Tribunal. Though it runs into 13 pages, the major portion of the order relates to the factual aspects of the case which have not much relevance while disposing of the stay applications. Learned counsel for the petitioner urged that the factors which are relevant for deciding the stay applications primarily are ; prima facie case, balance of convenience, financial status of the petitioner, hardship and also the interest of the Revenue which is likely to be caused in case the recovery is not stayed. The main thrust of the contention raised on behalf of the petitioner is that in view of the order passed by this court dated June 11, 1993, the petitioners are not in a position to pay the impugned tax. The order dated June 11, 1993, passed by this court restraining the petitioner from alienating/disposing of the properties, clearly indicates that even if the petitioner wants to dispose of the properties, assign or mortgage in order to enable him to deposit 25 per cent. of the impugned tax as directed by the Tribunal, he cannot do so and as such, it is utterly impossible for him to make any arrangements for the payment of 25 per cent. of the impugned tax as ordered by the Tribunal. It has also been urged by learned counsel for the petitioner that the petitioner has only been performing the duties as trustee of the properties including movable or immovable which are under the control of the court. It was further submitted that in view of the said fact the petitioner is unable to arrange funds. So far as the interest of the Revenue is concerned, the same is fully secured as the property is in custodia legis. From the perusal of the impugned order it is abundantly clear that this fact is not disputed that all the assets continue to be under the control and supervision of the District Court. Learned counsel for the petitioner vehemently urged that the Tribunal has not assigned any reason as to why only 75 per cent. of the impugned tax should be stayed and the petitioner may be forced to deposit 25 per cent. of the impugned tax before the appeals are heard. The submission raised on behalf of the petitioner appears to have sufficient force. The perusal of the order passed by the Tribunal does indicate that the Tribunal was fully conscious of the economic stringencies faced by the petitioner which appealed to the conscience of the Tribunal for staying 75 per cent. of the impugned tax, but it does not stand to reason that if on the same premises the Tribunal has postponed the recovery of 75 per cent. of the impugned tax till the disposal of the appeals, there appears to be no material facts which could warrant the directions for deposit of 25 per cent. of the impugned tax. From the perusal of the order of the Tribunal, it also appears that the Tribunal has been swayed by the orders of the appellate authority under which the demand has been created while disposing of the stay applications. The orders of the appellate authority creating liability have no relevance. The Tribunal was supposed to apply its own mind by applying criteria for grant of stay. The Tribunal in its order in spite of taking note of the fact that the properties are not available for sale or alienation because of the directions given by this court on June 11, 1993, the Tribunal observed that it is for the executors of the legal heirs to find out ways as to how to pay the Government dues. The aforesaid observation of the Tribunal is neither judicious nor legal and in fact, is arbitrary in nature. Once it is established that the petitioner has no cash in liquid with him, he cannot dispose of/alienate in any manner the properties in view of the restraint order dated June 11, 1993. In what manner and ways he is supposed to make arrangements for paying the impugned tax. It is also clear that the petitioner had filed the stay applications for staying the total recovery and had also prayed for early hearing of the appeals. The prayer for early hearing of the appeals was seriously opposed by the Revenue, but the Tribunal taking into account the entire facts, interest of the petitioner as well as the interest of the Revenue rejected the plea of the Revenue and directed that the appeals be fixed for hearing in the second week of May, 1996. It has also been urged on behalf of the petitioner that in view of the fact that the hearing of the appeals was to take place in the second week of May, 1996, there appears to be no legitimate reason for compelling the petitioner to deposit 25 per cent. of the impugned tax on or before April 30, 1996, i.e., just before ten days of the hearing of the appeals. The perusal of the impugned order passed by the Tribunal also indicates that the contention raised by the petitioner before the Tribunal for staying the total recovery was not controverted and no relevant and convincing material regarding the financial status of the petitioner was placed before the Tribunal to establish that the petitioner was in a position to deposit 25 per cent. of the impugned tax. The main plea of the learned counsel for the Revenue before the Tribunal was that the remedies available to the petitioners have not been fully exhausted, therefore, stay applications were premature and should be rejected on that score alone, but the said plea did not find favour with the Tribunal and the Tribunal was of the view that the stay applications filed before the Tribunal were maintainable.
4. The aforesaid submission, in my view, has sufficient force and deserves to be accepted. In view of the facts stated above, learned counsel for the petitioner urged that the impugned order passed by the Tribunal directing the petitioner to deposit 25 per cent. of the impugned tax is arbitrary, erroneous, based on conjectures and surmises and cannot be sustained in the eyes of law.
5. The next and most important limb of the argument of learned counsel for the petitioner is that in view of Instruction No. 96 (F. No. 1/6/69-(ITCC)), dated August 21, 1969, the recovery of the total amount should have been stayed. The aforesaid instructions were issued by the Central Board of Direct Taxes on the basis of a speech made by the then Deputy Prime Minister, which runs as under :
". . . . where the income determined on assessment was substantially higher than the returned income, say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision of the appeals, provided there was no lapse on the part of the assessee."
6. Counsel for the petitioner further submitted that the aforesaid instructions are binding on all the authorities exercising the powers under the taxing statutes. In order to test the correctness of the aforesaid contention of learned counsel for the petitioner-asses see, the first question which requires consideration is as to what is the nature of the said instructions and whether it is binding on all the authorities exercising the powers under the taxing statutes. In support of his contention, learned counsel for the petitioner placed reliance on a decision of the Division Bench of the Kerala High Court rendered in the case of CIT v. Punalur Paper Mills Ltd., [1988] 170 ITR 37. The perusal of the aforesaid decision reveals that the Income-tax Officer allowed the claim of the assessee for extra shift allowance on machinery in its entirety. The Commissioner, in exercise of his powers of revision under Section 263 of the Income-tax Act, 1961, held that extra shift allowance could be allowed only in respect of such machinery as had worked during the previous year relevant to the assessment year and directed the Income-tax Officer to make a fresh assessment. On appeal to the Tribunal, the assessee contended that the Income-tax Officer was justified in granting extra shift allowance on the entire machinery in view of the circular of the Central Board of Direct Taxes, F. No. 10/ 83/63-ITA(II), dated September 28, 1970, which was binding on all the officers of the Department. The Tribunal accepted the contention of the assessee and allowed the appeal of the assessee. On a reference, the Revenue contended that the circular issued by the Board was only an administrative direction which would not bind the Department and it could not be given effect to since it went beyond, and deviated from, the terms of the statute, The said contention of the Revenue did not find favour with the Division Bench of the Kerala High Court and it was held that the Appellate Tribunal was justified in giving effect to the circular and that no error was committed by the Income-tax Officer in the assessment order passed by him in the matter of allowing extra shift allowance on the entire machinery. The next case on which counsel placed reliance is the decision of this court rendered by the Division Bench consisting the then Chief Justice J.S. Verma and M.C. Jain J., in the case of CWT v. Sanwarmal Shivkumar, [1988] 171 ITR 377. The Division Bench has held that the income-tax as well as the Wealth-tax Departments are bound to follow the circular issued by the Central Board of Direct Taxes. Counsel also places reliance on the judgment of the Madhya Pradesh High Court rendered by the Division Bench in the case of Jaikishan Gopikishan and Sons v. CIT, [1989] 178 ITR 481, in which it was held that the circulars issued by the Central Board of Direct Taxes are binding on all the officers of the Income-tax Department. Benevolent circulars are in the nature of administrative relief and they assist the assessee. Not only this, learned counsel contended that even if the circulars are placed before the High Court for the first time during the course of hearing, the petitioner is entitled to the benefit of the same in spite of the fact that the same were not placed before the Tribunal, but in the instant case it is not so inasmuch as, the cases in support of the said contention cited before the Tribunal were placed before the Tribunal which have been referred to in the impugned order passed by the Tribunal. Learned counsel for the petitioner also places reliance on a judgment of the Division Bench of the apex court rendered in the case of K.P. Varghese v. ITO, [1981] 131 ITR 597, in which the apex court had taken a view that circulars of the Central Board of Direct Taxes dated July 7, 1964, and January 14, 1974, are binding on the Department. Therefore, in view of the law laid down by the apex court, the Kerala High Court, the Madhya Pradesh High Court and this court, this proposition cannot be disputed that the circulars issued by the Central Board of Direct Taxes are binding on the authorities exercising the powers under the taxing statute and have sufficient force of law.
7. The other question which requires determination by this court is whether Instruction No. 96 dated August 21, 1969, on which the petitioner places reliance is applicable in the facts of the case. From the perusal of the aforesaid instruction, it is clear that where the income determined on assessment was substantially higher than the returned income, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision of the appeals. It cannot be disputed in the present case that the income of the petitioner which was determined by the authority was much more than twice the returned income. In support of his contention, counsel placed reliance on a judgment of the Allahabad High Court in the case of Mrs. R. Mani Goyal v. CIT, [1996] 217 ITR 641, wherein it was held that if the income determined on assessment is substantially greater than the returned income and if appeal is filed, recovery should be stayed till the disposal of appeal. I have perused the aforesaid judgment of the Allahabad High Court in which the observations made by the then Deputy Prime Minister have been quoted and placing reliance on the same the recovery of the impugned tax has been stayed till the disposal of the appeals. The observations made by the then Deputy Prime Minister regarding Instruction No. 96 dated August 21, 1969, has already been quoted hereinabove. Learned counsel for the petitioner further placed reliance on a judgment of the Punjab and Haryana High Court rendered by a Division Bench in the case of Sat Pal v. ITAT, [1996] 217 ITR 317 wherein, it was held by the Division Bench of the Punjab and Haryana High Court that pending disposal of the appeal, the recovery of the impugned tax must remain stayed. Learned counsel for the petitioner contended that though the said case was cited before the Tribunal, the Tribunal committed an error in not relying on the same. He further contended that though the Tribunal has mentioned in its judgment about the said decision, it has not given any reason as to why the said decision of the Punjab and Haryana High Court is not applicable in the facts of the case. The relevant portion of the order of the Tribunal, reads as under :
" The Punjab and Haryana High Court in the case of Sat Pal, [1996] 217 ITR 317 has observed that where the appeal of the petitioner was pending before the Appellate Tribunal, recovery of penalty must be stayed."
8. A perusal of the aforesaid portion of the order of the Tribunal indicates that the Tribunal has noticed the judgment of the Punjab and Haryana High Court, but has not assigned any reason whatsoever as to why the aforesaid judgment of the Punjab and Haryana High Court is not applicable in the facts of the case. Learned counsel for the petitioner urged that catena of judgments rendered by the Kerala High Court, Madhya Pradesh High Court and the Division Bench of this court were cited before the Tribunal, but the Tribunal committed an error in not considering those judgments and ignoring the law laid down by the apex court and the various other High Courts, acted illegally in not staying the recovery of entire impugned tax. The said contention of learned counsel for the petitioner appears to be convincing. In view of the said fact, I have no hesitation in holding that the Tribunal has not applied its mind in a proper perspective and has ignored the decisions of the various High Courts cited by the petitioner before it.
9. After giving my thoughtful consideration to the submissions made by learned counsel for the petitioner and after a careful perusal of the material on record and also after applying the law laid down by the apex court as well as catena of decisions of the various High Courts including the Division Bench of this court, I am of the opinion that petitioner has made out a case for staying the entire impugned tax involved in the appeals which are pending before the Income-tax Appellate Tribunal, Jaipur, respondent No. 1, till the disposal of the appeals.
10. For the reasons stated above, I direct that the recovery of the entire impugned tax involved in all the appeals pending before the Tribunal should remain stayed till the disposal of the appeals and the petitioner should not be forced to deposit 25 per cent. of the impugned tax. I am of the opinion that in view of the order dated June 11, 1993, passed by this court the interest of the Revenue is fully secured. I further direct that hearing of the appeals should not be adjourned on the ground that condition for deposit of 25 per cent. of impugned tax has not been complied with by the petitioner. Since the Tribunal has already fixed the appeals for hearing in the second week of May, 1996, it is not considered proper to issue fresh directions, however, I am confident that appeals would be heard in the second week of May, 1996, and shall be decided finally at the earliest. The petitioner is also directed to co-operate in the final disposal of the appeals pending before the Tribunal.
11. With the directions given above, the writ petition stands finally disposed of at the admission stage itself.